A newly-tapped oil field off the coast of Brazil could contain up to 15 billion barrels of oil, officials say.
Brazil's national petroleum agency said the Libra field most probably held around 8 billion barrels.
That matches the size of the giant Tupi oil field, whose discovery in 2007 drew attention to Brazil's potential as a major oil producer.
If the 15 billion barrel figure were confirmed it would double Brazil's known oil reserves.
It would also be the biggest oil field discovered in the Americas since 1976, when Mexico found the giant Cantarell field in the Gulf of Mexico.
The Libra exploratory well is located 183km (114 miles) offshore from Rio de Janeiro.
"The volume of recoverable oil belonging to the nation could vary from 3.7 billion to 15 billion barrels, with the most likely estimate being 7.9 billion barrels," the national petroleum agency (ANP) said in a statement.
Brazil has discovered billions of barrels of oil in the last few years, mostly in deep, pre salt fields off its south-eastern coast.
The discoveries should make Brazil one of the world's top 10 oil producers.
Outgoing President Luiz Inacio Lula da Silva has said future oil revenues will be used to eradicate poverty and invest in education and technology.
In September the Brazilian oil company Petrobras, which is partly owned by the state, raised $70bn (£44.7bn) to develop the new fields in the world's largest ever public share offering.
Saturday, October 30, 2010
Monday, October 25, 2010
Popular sees room for expanding margins on deposit side - Puerto Rico
Puerto Rico's Popular (Nasdaq: BPOP) believes there is a possibility to expand margins on the deposit side, given low current interest rates and the effects of the recent industry consolidation experienced in the island, chairman and CEO Richard Carrion told a conference call.
Popular's net interest margin increased to 4.49% in 3Q10 from 3.21% in the previous quarter, boosted by a continued reduction in the cost of deposits.
"We are focused on reducing the cost of deposits, and they have clearly been coming down following the three [recent bank] closings [by US financial regulators]. There is still some pressure in Puerto Rico, as some banks shift from brokered deposits to client-generated local deposits," Carrion said.
Last April, Popular as well as Canada's Scotiabank (NYSE: BNS) and Puerto Rico's Oriental Financial Group (NYSE: OFG) purchased Westernbank, R-G Premier Bank and Eurobank respectively in an auction held by the Federal Deposit Insurance Corporation (FDIC).
"There has been an effort by other banks to try to capitalize on that and take clients away, and everybody's waiting for that dust to settle. I do expect deposit costs to continue to decrease given the level of interest rates we are seeing," Carrion said.
The sale of a 51% stake in its processing business EVERTEC to asset manager Apollo Management allowed Popular to post a US$495mn net profit in 3Q10 - the first after eight straight quarters of losses.
Excluding that one-time gain, Popular booked a US$36mn quarterly loss, 71% less than in 3Q09 and also better than the US$55.8mn loss posted in the previous quarter.
Popular is the leading banking institution by both assets and deposits in Puerto Rico and ranks 33rd by assets among US banks.
Source: www.bnamericas.com
Popular's net interest margin increased to 4.49% in 3Q10 from 3.21% in the previous quarter, boosted by a continued reduction in the cost of deposits.
"We are focused on reducing the cost of deposits, and they have clearly been coming down following the three [recent bank] closings [by US financial regulators]. There is still some pressure in Puerto Rico, as some banks shift from brokered deposits to client-generated local deposits," Carrion said.
Last April, Popular as well as Canada's Scotiabank (NYSE: BNS) and Puerto Rico's Oriental Financial Group (NYSE: OFG) purchased Westernbank, R-G Premier Bank and Eurobank respectively in an auction held by the Federal Deposit Insurance Corporation (FDIC).
"There has been an effort by other banks to try to capitalize on that and take clients away, and everybody's waiting for that dust to settle. I do expect deposit costs to continue to decrease given the level of interest rates we are seeing," Carrion said.
The sale of a 51% stake in its processing business EVERTEC to asset manager Apollo Management allowed Popular to post a US$495mn net profit in 3Q10 - the first after eight straight quarters of losses.
Excluding that one-time gain, Popular booked a US$36mn quarterly loss, 71% less than in 3Q09 and also better than the US$55.8mn loss posted in the previous quarter.
Popular is the leading banking institution by both assets and deposits in Puerto Rico and ranks 33rd by assets among US banks.
Source: www.bnamericas.com
Cosan posts preliminary US$4.7bn quarterly revenue, up 32% - Brazil
Brazilian sugar and ethanol major Cosan (NYSE: CZZ) has posted second fiscal quarter net revenue of 4.7bn reais (US$2.75bn), a 32% jump over the year-ago period.
Cosan's second fiscal quarter runs from July through September.
Of that amount, 1.75bn reais came from Cosan's sugar and ethanol business, up 45% on the year, the company said in a statement. The fuel and lubricants unit contributed 2.8bn reais to revenue, a 26% year-on-year gain.
Ethanol sales in the three-month period totaled 639Ml, up 42% from the same period last year.
All figures are preliminary and Cosan's final balance sheet is due for release on November 10.
Meanwhile, Moody's raised its corporate family rating on Cosan to Ba2 from Ba3.
The move completes a review started in March after Cosan and Shell (NYSE: RDS-B) announced the creation of a US$12bn JV in the ethanol and fuel distribution businesses.
Moody's also assigned a Ba2 rating to a proposed Cosan perpetual bond issue worth US$300mn.
The same bonds were rated BB by Standard & Poor's and Fitch.
The bonds will be issued by Cosan subsidiary Cosan Overseas Limited.
Source: www.bnamericas.com
Cosan's second fiscal quarter runs from July through September.
Of that amount, 1.75bn reais came from Cosan's sugar and ethanol business, up 45% on the year, the company said in a statement. The fuel and lubricants unit contributed 2.8bn reais to revenue, a 26% year-on-year gain.
Ethanol sales in the three-month period totaled 639Ml, up 42% from the same period last year.
All figures are preliminary and Cosan's final balance sheet is due for release on November 10.
Meanwhile, Moody's raised its corporate family rating on Cosan to Ba2 from Ba3.
The move completes a review started in March after Cosan and Shell (NYSE: RDS-B) announced the creation of a US$12bn JV in the ethanol and fuel distribution businesses.
Moody's also assigned a Ba2 rating to a proposed Cosan perpetual bond issue worth US$300mn.
The same bonds were rated BB by Standard & Poor's and Fitch.
The bonds will be issued by Cosan subsidiary Cosan Overseas Limited.
Source: www.bnamericas.com
Brasil Ecodiesel Falls the Most in 8 Months on Maeda Agroindustrial Talks
Brasil Ecodiesel Industria e Comercio de Biocombustiveis e Oleos Vegetais SA, Brazil’s biggest biodiesel maker, fell the most in almost eight months after saying it is in talks to combine assets with farm group Maeda SA Agroindustrial SA.
Brasil Ecodiesel fell 8 percent, leading losses on the Bovespa index, to 1.15 reais at 2:32 p.m. New York time in Sao Paulo trading. Shares slumped 10.4 percent earlier today, the biggest loss since March 5.
The company, based in Rio de Janeiro, said it may conclude the deal by Dec. 31. The company said Maeda’s shareholders may receive one Brasil Ecodiesel share for every 3.6395 shares they own.
“Investors were disappointed by the implicit share price of the accord,” Victor Martins, an analyst with Sao Paulo-based Planner Corretora de Valores, said today in a phone interview. He estimates the implicit share price of the deal would be 88 centavos. He cut his rating to “neutral” from “buy” after the statement was released.
Source: www.bloomberg.com
Brasil Ecodiesel fell 8 percent, leading losses on the Bovespa index, to 1.15 reais at 2:32 p.m. New York time in Sao Paulo trading. Shares slumped 10.4 percent earlier today, the biggest loss since March 5.
The company, based in Rio de Janeiro, said it may conclude the deal by Dec. 31. The company said Maeda’s shareholders may receive one Brasil Ecodiesel share for every 3.6395 shares they own.
“Investors were disappointed by the implicit share price of the accord,” Victor Martins, an analyst with Sao Paulo-based Planner Corretora de Valores, said today in a phone interview. He estimates the implicit share price of the deal would be 88 centavos. He cut his rating to “neutral” from “buy” after the statement was released.
Source: www.bloomberg.com
Brazil May Take More Currency Measures If Needed, Anthero Meirelles Says
Brazil may adopt additional measures to curb foreign capital inflows if steps already taken aren’t effective, central bank Director Anthero Meirelles said.
“Other measures may be taken, but first we need to carefully observe what happens,” Meirelles said in an interview while attending a Uruguayan central bank event in Montevideo.
“It’s difficult to announce in advance another measure because the process is very dynamic,” said Meirelles. “We need to observe the result of the measures already taken and watch the evolution of the global discussion over the current moment of great liquidity and large international capital flows.”
Meirelles, the director of administration at the central bank, said Brazil is “very optimistic” about steps taken by the Group of 20 over the weekend to produce stronger, more balanced global economic growth.
Source: www.bloomberg.com
“Other measures may be taken, but first we need to carefully observe what happens,” Meirelles said in an interview while attending a Uruguayan central bank event in Montevideo.
“It’s difficult to announce in advance another measure because the process is very dynamic,” said Meirelles. “We need to observe the result of the measures already taken and watch the evolution of the global discussion over the current moment of great liquidity and large international capital flows.”
Meirelles, the director of administration at the central bank, said Brazil is “very optimistic” about steps taken by the Group of 20 over the weekend to produce stronger, more balanced global economic growth.
Source: www.bloomberg.com
Pensioners From Chile to Colombia Buy Overseas Real Bonds: Brazil Credit
By Gabrielle Coppola and Ye Xie
When bankers at Deutsche Bank AG and Barclays Plc were piecing together orders last week for Brazil’s first real-linked international bond sale in three years, they discovered a new source of demand: Latin American pension funds.
“We had never seen these investors in global local currency deals,” said Dennis Eisele, a director in New York at Deutsche Bank, the biggest underwriter this year of overseas bond sales by Latin American issuers. He said investors from the region including Colombia, Peru and Chile made up a “substantial” amount of the almost 3.5 billion reais ($2.06 billion) of orders. “That’s great demand,” he said.
Brazil sold 1.1 billion reais of bonds due in 2028 to yield 8.85 percent, at least 200 basis points, or 2 percentage points, above local-currency debt yields from the five other investment- grade countries in Latin America.
Real-denominated bonds sold overseas, typically bought by investors in the U.S., Europe and Japan looking for alternatives to near-zero benchmark rates in their countries, are beginning to lure Latin American pension funds seeking to invest assets abroad. Pension fund assets have risen more than 80 percent in Chile, Peru and Colombia since 2005, buoyed in part by surging commodity exports and quickening economic growth.
Chilean pension fund investments have risen to $138 billion from $72 billion in 2005 while those held by funds in Colombia jumped to $49.7 billion from $20.1 billion, according to regulators in those countries. Peruvian pension fund assets climbed to $28.8 billion from $11.6 billion in 2005.
Credit Growth
Assets managed by the 100 largest U.S. public pension funds, by comparison, have declined 3.7 percent since 2005 to $2.35 trillion, according to the U.S. Census Bureau.
“It’s a combination of the Brazilian credit and the growth of the pension fund system in Latin America,” Fabianna Del Canto, who works on the emerging-markets bond syndicate at Barclays in London, said in a telephone interview.
Brazil’s economic expansion, on pace to be the fastest in more than two decades, has attracted funds forced to look outside their borders for longer-dated assets, according to Barclays, which ranks 10th in Latin American bond underwriting this year, according to data compiled by Bloomberg.
In Chile, where the 2.75 percent benchmark lending rate is 800 basis points below Brazil’s 10.75 percent target rate, foreign investment accounts for 46 percent of pension fund assets, up from 29 percent in 2005. In Peru, where the key lending rate is 3 percent, foreign assets have risen to 26 percent of pension fund holdings from 9.5 percent in September 2005, according to data compiled by regulators.
‘Attractive’ Yields
“Brazil is a very good sovereign bond and the spread it has over U.S. Treasuries right now is attractive for the levels of risk,” said Gonzalo Camargo, who oversees $6.8 billion in Lima at AFP Horizonte, Peru’s third-largest pension fund. “The yield and carry the bonds pay is very attractive and we’re diversifying our portfolio.”
Camargo declined to say whether he participated in the Brazilian debt offering.
Porvenir, Colombia’s biggest pension fund, said in an e- mail response to questions that it’s considering buying emerging-market local-currency bonds. Porvenir declined to comment on whether it participated in Brazil’s bond sale. Alejandro Perez-Reyes, head of investments at Prima AFP, Peru’s largest pension fund, didn’t return a telephone call seeking comment. Chile’s pension funds aren’t allowed to comment on their holdings.
‘Testament’
The pension fund demand is “a testament to Brazil’s improved macro fundamentals and the yield dynamics offered by Brazilian asset prices at this point,” said Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co. in New York.
Brazil’s economy, Latin America’s largest, will expand 7.5 percent this year, compared with 2.6 percent for the U.S., 1.7 percent in the 16-nation euro zone, and an average of 7.1 percent for developing nations, according to International Monetary Fund forecasts.
While Brazil earned investment-grade ratings from Moody’s Investors Service, Standard & Poor’s and Fitch Ratings in the past two years, the country’s ranking is still too low for Mexican pension funds to be allowed to invest in its bonds.
Mexican Funds
Mexican funds can only buy international bonds rated at least A-, or four levels above junk, according to government regulator Consar. Brazilian debt has the lowest investment-grade ranking, or BBB- at S&P and Fitch and Baa3 at Moody’s.
The extra yield investors demand to own Brazilian government dollar bonds instead of Treasuries fell 1 basis point to 182 at 10:07 a.m. in New York, according to JPMorgan Chase & Co. indexes.
The yield on Brazil’s interest-rate futures contract due in January 2012 rose 1 basis point to 11.37 percent.
The cost of protecting Brazilian debt against non-payment for five years with credit-default swaps rose 3 basis points last week to 99 basis points, according to data compiled by CMA DataVision. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Real Declines
The real strengthened 0.2 percent to 1.7021 per dollar today. It has lost 1.7 percent since the government raised a tax on foreigners’ local fixed-income purchases for the second time this month to stem the rally and shore up exports.
Brazil issued the real-linked international bonds three days after the Oct. 18 tax increase to 6 percent. Treasury Secretary Arno Augustin said in an Oct. 21 interview that the government plans to sell more bonds denominated in reais overseas this year as part of its efforts to curb gains in the currency. Buyers of the international real-linked securities, which settle in U.S. dollars and are subject to New York law, don’t pay the tax.
The real has advanced 108 percent since President Luiz Inacio Lula da Silva took office in 2003, buoyed in part by the world’s second-highest inflation-adjusted interest rates, after Croatia, according to data compiled by Bloomberg.
In February 2007, Brazil first issued the real-linked bonds due in 2028 with a coupon of 10.25 percent. The yield declined to 8.6 percent on Oct. 14, the lowest since June 2007, as record-low yields in the U.S. and Europe fueled demand for emerging-market debt.
Real-denominated bonds have returned 21 percent annually in dollar-based terms in the past four years, compared with 10 percent on Chilean peso debt, 13 percent on local Peru notes and 19 percent on Colombian securities, according to JPMorgan.
“Local pension funds are getting inflows, positive returns, they’re looking for diversification,” said Alberto Ramos, senior economist at Goldman Sachs Group Inc. in New York.
Source: www.bloomberg.com
When bankers at Deutsche Bank AG and Barclays Plc were piecing together orders last week for Brazil’s first real-linked international bond sale in three years, they discovered a new source of demand: Latin American pension funds.
“We had never seen these investors in global local currency deals,” said Dennis Eisele, a director in New York at Deutsche Bank, the biggest underwriter this year of overseas bond sales by Latin American issuers. He said investors from the region including Colombia, Peru and Chile made up a “substantial” amount of the almost 3.5 billion reais ($2.06 billion) of orders. “That’s great demand,” he said.
Brazil sold 1.1 billion reais of bonds due in 2028 to yield 8.85 percent, at least 200 basis points, or 2 percentage points, above local-currency debt yields from the five other investment- grade countries in Latin America.
Real-denominated bonds sold overseas, typically bought by investors in the U.S., Europe and Japan looking for alternatives to near-zero benchmark rates in their countries, are beginning to lure Latin American pension funds seeking to invest assets abroad. Pension fund assets have risen more than 80 percent in Chile, Peru and Colombia since 2005, buoyed in part by surging commodity exports and quickening economic growth.
Chilean pension fund investments have risen to $138 billion from $72 billion in 2005 while those held by funds in Colombia jumped to $49.7 billion from $20.1 billion, according to regulators in those countries. Peruvian pension fund assets climbed to $28.8 billion from $11.6 billion in 2005.
Credit Growth
Assets managed by the 100 largest U.S. public pension funds, by comparison, have declined 3.7 percent since 2005 to $2.35 trillion, according to the U.S. Census Bureau.
“It’s a combination of the Brazilian credit and the growth of the pension fund system in Latin America,” Fabianna Del Canto, who works on the emerging-markets bond syndicate at Barclays in London, said in a telephone interview.
Brazil’s economic expansion, on pace to be the fastest in more than two decades, has attracted funds forced to look outside their borders for longer-dated assets, according to Barclays, which ranks 10th in Latin American bond underwriting this year, according to data compiled by Bloomberg.
In Chile, where the 2.75 percent benchmark lending rate is 800 basis points below Brazil’s 10.75 percent target rate, foreign investment accounts for 46 percent of pension fund assets, up from 29 percent in 2005. In Peru, where the key lending rate is 3 percent, foreign assets have risen to 26 percent of pension fund holdings from 9.5 percent in September 2005, according to data compiled by regulators.
‘Attractive’ Yields
“Brazil is a very good sovereign bond and the spread it has over U.S. Treasuries right now is attractive for the levels of risk,” said Gonzalo Camargo, who oversees $6.8 billion in Lima at AFP Horizonte, Peru’s third-largest pension fund. “The yield and carry the bonds pay is very attractive and we’re diversifying our portfolio.”
Camargo declined to say whether he participated in the Brazilian debt offering.
Porvenir, Colombia’s biggest pension fund, said in an e- mail response to questions that it’s considering buying emerging-market local-currency bonds. Porvenir declined to comment on whether it participated in Brazil’s bond sale. Alejandro Perez-Reyes, head of investments at Prima AFP, Peru’s largest pension fund, didn’t return a telephone call seeking comment. Chile’s pension funds aren’t allowed to comment on their holdings.
‘Testament’
The pension fund demand is “a testament to Brazil’s improved macro fundamentals and the yield dynamics offered by Brazilian asset prices at this point,” said Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co. in New York.
Brazil’s economy, Latin America’s largest, will expand 7.5 percent this year, compared with 2.6 percent for the U.S., 1.7 percent in the 16-nation euro zone, and an average of 7.1 percent for developing nations, according to International Monetary Fund forecasts.
While Brazil earned investment-grade ratings from Moody’s Investors Service, Standard & Poor’s and Fitch Ratings in the past two years, the country’s ranking is still too low for Mexican pension funds to be allowed to invest in its bonds.
Mexican Funds
Mexican funds can only buy international bonds rated at least A-, or four levels above junk, according to government regulator Consar. Brazilian debt has the lowest investment-grade ranking, or BBB- at S&P and Fitch and Baa3 at Moody’s.
The extra yield investors demand to own Brazilian government dollar bonds instead of Treasuries fell 1 basis point to 182 at 10:07 a.m. in New York, according to JPMorgan Chase & Co. indexes.
The yield on Brazil’s interest-rate futures contract due in January 2012 rose 1 basis point to 11.37 percent.
The cost of protecting Brazilian debt against non-payment for five years with credit-default swaps rose 3 basis points last week to 99 basis points, according to data compiled by CMA DataVision. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
Real Declines
The real strengthened 0.2 percent to 1.7021 per dollar today. It has lost 1.7 percent since the government raised a tax on foreigners’ local fixed-income purchases for the second time this month to stem the rally and shore up exports.
Brazil issued the real-linked international bonds three days after the Oct. 18 tax increase to 6 percent. Treasury Secretary Arno Augustin said in an Oct. 21 interview that the government plans to sell more bonds denominated in reais overseas this year as part of its efforts to curb gains in the currency. Buyers of the international real-linked securities, which settle in U.S. dollars and are subject to New York law, don’t pay the tax.
The real has advanced 108 percent since President Luiz Inacio Lula da Silva took office in 2003, buoyed in part by the world’s second-highest inflation-adjusted interest rates, after Croatia, according to data compiled by Bloomberg.
In February 2007, Brazil first issued the real-linked bonds due in 2028 with a coupon of 10.25 percent. The yield declined to 8.6 percent on Oct. 14, the lowest since June 2007, as record-low yields in the U.S. and Europe fueled demand for emerging-market debt.
Real-denominated bonds have returned 21 percent annually in dollar-based terms in the past four years, compared with 10 percent on Chilean peso debt, 13 percent on local Peru notes and 19 percent on Colombian securities, according to JPMorgan.
“Local pension funds are getting inflows, positive returns, they’re looking for diversification,” said Alberto Ramos, senior economist at Goldman Sachs Group Inc. in New York.
Source: www.bloomberg.com
Brazil's richest man builds huge port
São João da Barra, Brazil (CNN) -- Dangling above the South Atlantic, construction workers brave wind and waves to erect a vast 10-berth port terminal off the Brazilian coast.
Nicknamed the "highway to China," the $2.7 billion port will be one of the biggest in the world when completed in 2012.
Eike Batista, a mining mogul and Brazil's richest man, dreamed up the idea for the Acu Superport because he was fed up with the delays in getting iron ore from his mines onto ships bound for China.
"Land your cargo at a port and if it's a container, it may stay there for 30 to 60 days," Batista told CNN in an interview.
He ended up building a port and industrial complex that will be bigger than Manhattan and already is luring foreign and domestic investments.
"Brazil is a gigantic opportunity to arbitrage inefficiencies," he said.
Brazilian President Luiz Inacio Lula da Silva has visited the complex and so have a number of Chinese officials and business leaders.
LLX, Batista's logistics firm, ferries visitors out to the terminal in a helicopter, flying 400 kilometers (249 miles) north of Rio de Janeiro along the sparsely populated coast.
A cement causeway juts 3 kilometers (1.8 miles) into the ocean. It will boast a four-lane highway, pipelines and conveyer belts to move iron ore, soybeans and oil onto waiting ships, feeding China's insatiable appetite for raw materials.
Back in his office overlooking Rio's scenic Sugar Loaf Mountain, Batista insists the project is more than a pipeline to China.
"This is a story about connecting Brazil to the world. Because for the last 20 years, why haven't German companies or European or American companies come to Brazil?" he asks. "Very bad logistics."
Brazil's clogged roads and ports add billions of dollars to the cost of production every year. Analysts say improving the country's infrastructure will be one of the main challenges facing Lula da Silva's successor. Brazilians will elect a new president in a runoff vote October 31.
"This year the economy's growing at about 7 percent," Batista said. "The reason why we cannot eventually keep it up is because of bottlenecks. But bottlenecks are opportunities."
He says the Acu Superport has turned into a two-way highway, also attracting investment from China and other countries.
China's Wuhan Iron and Steel Co. agreed to sink $5 billion into a steel factory.
A cement factory, energy plant and oil treatment unit are also in the works.
And if all goes as planned, workers here eventually will put their stamp on a new all-Brazilian car company aimed at the country's booming domestic market.
"China has come up with its own brand of cars, so has India. Why not Brazil?" Batista asked.
By Shasta Darlington, CNN
Source: CNN
www.cnn.com
Nicknamed the "highway to China," the $2.7 billion port will be one of the biggest in the world when completed in 2012.
Eike Batista, a mining mogul and Brazil's richest man, dreamed up the idea for the Acu Superport because he was fed up with the delays in getting iron ore from his mines onto ships bound for China.
"Land your cargo at a port and if it's a container, it may stay there for 30 to 60 days," Batista told CNN in an interview.
He ended up building a port and industrial complex that will be bigger than Manhattan and already is luring foreign and domestic investments.
"Brazil is a gigantic opportunity to arbitrage inefficiencies," he said.
Brazilian President Luiz Inacio Lula da Silva has visited the complex and so have a number of Chinese officials and business leaders.
LLX, Batista's logistics firm, ferries visitors out to the terminal in a helicopter, flying 400 kilometers (249 miles) north of Rio de Janeiro along the sparsely populated coast.
A cement causeway juts 3 kilometers (1.8 miles) into the ocean. It will boast a four-lane highway, pipelines and conveyer belts to move iron ore, soybeans and oil onto waiting ships, feeding China's insatiable appetite for raw materials.
Back in his office overlooking Rio's scenic Sugar Loaf Mountain, Batista insists the project is more than a pipeline to China.
"This is a story about connecting Brazil to the world. Because for the last 20 years, why haven't German companies or European or American companies come to Brazil?" he asks. "Very bad logistics."
Brazil's clogged roads and ports add billions of dollars to the cost of production every year. Analysts say improving the country's infrastructure will be one of the main challenges facing Lula da Silva's successor. Brazilians will elect a new president in a runoff vote October 31.
"This year the economy's growing at about 7 percent," Batista said. "The reason why we cannot eventually keep it up is because of bottlenecks. But bottlenecks are opportunities."
He says the Acu Superport has turned into a two-way highway, also attracting investment from China and other countries.
China's Wuhan Iron and Steel Co. agreed to sink $5 billion into a steel factory.
A cement factory, energy plant and oil treatment unit are also in the works.
And if all goes as planned, workers here eventually will put their stamp on a new all-Brazilian car company aimed at the country's booming domestic market.
"China has come up with its own brand of cars, so has India. Why not Brazil?" Batista asked.
By Shasta Darlington, CNN
Source: CNN
www.cnn.com
Wednesday, October 20, 2010
Banorte, Ixe sign tentative merger agreement, push geographic, client gains - Mexico
Mexican financial groups Banorte and Ixe have signed a tentative agreement to merge, pending due diligence, the companies said in a joint press release that pushed the potential benefits of the deal in terms of their respective geographic operations and client bases.
The two groups have been in talks over M&A possibilities since the beginning of the month. Together, the new company would become the third largest financial group in Mexico by assets and credit portfolio, displacing Santander Mexico.
Ixe and Banorte remained vague on the details of the deal, saying that the non-binding agreement could "result in a merger, or the design of some integration mechanism that allows [the companies] to create greater value jointly."
The agreement allows for an "exclusivity period to conclude the negotiations" and carry out due diligence.
The release noted that a merger of the two companies would create a powerful financial company by combining Banorte's large branch network in the northern part of the country with Ixe's "significant presence" in Mexico City.
The release said the banks will also complement each other in terms of market segments, as Banorte is a broad-based retail bank while Ixe focuses mainly on high-end and corporate clients.
GOOD DEAL?
As of the end of August, Grupo Financiero Banorte's flagship bank had the third largest credit portfolio in the Mexican market, with 232bn pesos (US$18.7bn), behind Banamex (343bn pesos) and BBVA Bancomer (546bn pesos).
Ixe's flagship bank was in tenth place with a portfolio worth 28.5bn pesos.
Analysts have commented that a merger with Ixe would be a positive move for Banorte since the financial group has a very healthy credit portfolio and is trading below Banorte's price-to-book ratio on the Mexican stock exchange BMV.
However, Ixe has struggled with profitability as of late, with an ROE of around 1%. Bank executives chalk this up to a heavy round of investment in recent years to grow the group's branch network and portfolios.
Banorte has been searching for acquisitions for some time now, buying a private sector pension manager from Ixe last year and flirting with troubled non-bank mortgage lender Hipotecaria Su Casita.
Banorte is the largest Mexican-controlled financial group in a market dominated by multinationals.
Source: www.bnamericas.com
The two groups have been in talks over M&A possibilities since the beginning of the month. Together, the new company would become the third largest financial group in Mexico by assets and credit portfolio, displacing Santander Mexico.
Ixe and Banorte remained vague on the details of the deal, saying that the non-binding agreement could "result in a merger, or the design of some integration mechanism that allows [the companies] to create greater value jointly."
The agreement allows for an "exclusivity period to conclude the negotiations" and carry out due diligence.
The release noted that a merger of the two companies would create a powerful financial company by combining Banorte's large branch network in the northern part of the country with Ixe's "significant presence" in Mexico City.
The release said the banks will also complement each other in terms of market segments, as Banorte is a broad-based retail bank while Ixe focuses mainly on high-end and corporate clients.
GOOD DEAL?
As of the end of August, Grupo Financiero Banorte's flagship bank had the third largest credit portfolio in the Mexican market, with 232bn pesos (US$18.7bn), behind Banamex (343bn pesos) and BBVA Bancomer (546bn pesos).
Ixe's flagship bank was in tenth place with a portfolio worth 28.5bn pesos.
Analysts have commented that a merger with Ixe would be a positive move for Banorte since the financial group has a very healthy credit portfolio and is trading below Banorte's price-to-book ratio on the Mexican stock exchange BMV.
However, Ixe has struggled with profitability as of late, with an ROE of around 1%. Bank executives chalk this up to a heavy round of investment in recent years to grow the group's branch network and portfolios.
Banorte has been searching for acquisitions for some time now, buying a private sector pension manager from Ixe last year and flirting with troubled non-bank mortgage lender Hipotecaria Su Casita.
Banorte is the largest Mexican-controlled financial group in a market dominated by multinationals.
Source: www.bnamericas.com
Tuesday, October 19, 2010
Bank credit keeps setting records ahead of new regulatory, monetary measures - Peru
By Peter Krupa / Business News Americas
Ahead of moves by regulators to slow things down, Peruvian bank credit has continued to make records, rising to the highest level in history through the end of September.
The banking sector's credit portfolio rose 20.7% year-on-year through the end of the third quarter to the equivalent of US$37.0bn, according to numbers released by local banking association Asbanc.
The strong 12-month growth in bank lending was made up of steady month-to-month growth that has accelerated into the year. Credit growth from end-August to end-September came in at 1.92%, similar to monthly growth levels seen since roughly October 2009.
"The strong performance of lending is based on the high levels of growth seen in the country's economy," Asbanc said in a press release on the numbers.
POLICY TO PRESSURE LENDING GROWTH?
The strong lending growth in August took place in the context of a series of counter-cyclical and monetary measures by regulators that may yet affect the speed of bank lending growth.
Peruvian central bank BCRP has moved several times this year to raise the minimum reserve requirement, but the most recent move to hike it by 50 basis points to 9% took place toward the beginning of this month.
Likewise, banking regulator SBS announced just this month that steady GDP growth above 5% had triggered counter-cyclical reserve provision requirements, which would force banks to put aside more funds to cover the future risks of that heated growth.
Authorities say neither measure is directly intended to put pressure on lending growth, with the first measure looking to ease the sol's appreciation and the second measure being simply a rainy day policy that regulators say will not have a significant effect on balance sheets.
Adding to that, the BCRP surprised the market by deciding last week to leave its target rate at 3%. Market observers see that dovishness continuing through the end of the year, leaving open the possibility of a continued high rate of credit growth pressured from the demand side into 2011.
Ahead of moves by regulators to slow things down, Peruvian bank credit has continued to make records, rising to the highest level in history through the end of September.
The banking sector's credit portfolio rose 20.7% year-on-year through the end of the third quarter to the equivalent of US$37.0bn, according to numbers released by local banking association Asbanc.
The strong 12-month growth in bank lending was made up of steady month-to-month growth that has accelerated into the year. Credit growth from end-August to end-September came in at 1.92%, similar to monthly growth levels seen since roughly October 2009.
"The strong performance of lending is based on the high levels of growth seen in the country's economy," Asbanc said in a press release on the numbers.
POLICY TO PRESSURE LENDING GROWTH?
The strong lending growth in August took place in the context of a series of counter-cyclical and monetary measures by regulators that may yet affect the speed of bank lending growth.
Peruvian central bank BCRP has moved several times this year to raise the minimum reserve requirement, but the most recent move to hike it by 50 basis points to 9% took place toward the beginning of this month.
Likewise, banking regulator SBS announced just this month that steady GDP growth above 5% had triggered counter-cyclical reserve provision requirements, which would force banks to put aside more funds to cover the future risks of that heated growth.
Authorities say neither measure is directly intended to put pressure on lending growth, with the first measure looking to ease the sol's appreciation and the second measure being simply a rainy day policy that regulators say will not have a significant effect on balance sheets.
Adding to that, the BCRP surprised the market by deciding last week to leave its target rate at 3%. Market observers see that dovishness continuing through the end of the year, leaving open the possibility of a continued high rate of credit growth pressured from the demand side into 2011.
Friday, October 15, 2010
Russia to help Venezuela build nuclear power station
Moscow, Russia (CNN) -- Russia and Venezuela signed an agreement Friday calling for Russia to build a nuclear power station in the South American nation.
Russian President Dmitry Medvedev and Venezuelan President Hugo Chavez formally signed the deal here after reaching an agreement in April.
It's the latest example of increasingly close cooperation between the two nations on matters of energy, trade and defense -- a relationship that has raised eyebrows in the United States.
"I don't know who might wince from this news," Medvedev said at a news conference. "The president (Chavez) said that there are countries which may have different feelings about it. But I'd like to say that our intentions are absolutely pure and open."
Venezuela is on the path toward developing nuclear, solar and wind energy, which are trends "of high interest to the entire world," Chavez said, according to the state-run Venezuelan News Agency.
Medvedev said Russia sees atomic energy cooperation as one of its international priorities and that it builds nuclear power stations around the world.
In addition to helping Venezuela build the nuclear power station, Russia will build a research reactor to produce isotopes for peaceful industries and medicine, according to the text of the agreement.
Russia and Venezuela have increased their cooperation on a number of fronts in recent years. Last year, Russia approved $2.2 billion in credit to Venezuela to finance the purchase of 92 Soviet-era T-72 tanks and short-range missiles; Venezuela also planned to buy an anti-aircraft weapons system with a range of 185 miles (300 km).
Chavez defended the arms purchase.
"We are not going to attack anyone," Chaves said then. "Those are only defense instruments because we are going to defend the nation from any threat, from wherever it comes."
Yet the deal raised concerns in the United States, where a State Department spokesman said that Venezuela's desire to increase its arsenal poses a "serious challenge to stability in the Western Hemisphere." This year, however, State Department spokesman Philip Crowley said Venezuela's ambition to increase its arsenal, while suspicious, is an issue "between Venezuela and Russia."
"We don't care. ... Our primary concern is not if Venezuela wants to acquire ... this equipment," he said. "Our primary concern is that if Venezuela is going to increase its military hardware, we certainly don't want to see this hardware migrate into other parts of the hemisphere."
Chavez also met last year with Medvedev and Putin to negotiate and sign new oil and gas contracts between their countries. And in September 2009, Chavez announced while in Russia that Venezuela would recognize as independent republics the regions of Abkhazia and South Ossetia, becoming just the third country, after Russia and Nicaragua, to do so.
Russia generally has backed independence for the two regions. Nearby Georgia, which fought a war with Russia in 2008, opposes independence for the two regions.
By the CNN Wire Staff
Source: www.cnn.com
Russian President Dmitry Medvedev and Venezuelan President Hugo Chavez formally signed the deal here after reaching an agreement in April.
It's the latest example of increasingly close cooperation between the two nations on matters of energy, trade and defense -- a relationship that has raised eyebrows in the United States.
"I don't know who might wince from this news," Medvedev said at a news conference. "The president (Chavez) said that there are countries which may have different feelings about it. But I'd like to say that our intentions are absolutely pure and open."
Venezuela is on the path toward developing nuclear, solar and wind energy, which are trends "of high interest to the entire world," Chavez said, according to the state-run Venezuelan News Agency.
Medvedev said Russia sees atomic energy cooperation as one of its international priorities and that it builds nuclear power stations around the world.
In addition to helping Venezuela build the nuclear power station, Russia will build a research reactor to produce isotopes for peaceful industries and medicine, according to the text of the agreement.
Russia and Venezuela have increased their cooperation on a number of fronts in recent years. Last year, Russia approved $2.2 billion in credit to Venezuela to finance the purchase of 92 Soviet-era T-72 tanks and short-range missiles; Venezuela also planned to buy an anti-aircraft weapons system with a range of 185 miles (300 km).
Chavez defended the arms purchase.
"We are not going to attack anyone," Chaves said then. "Those are only defense instruments because we are going to defend the nation from any threat, from wherever it comes."
Yet the deal raised concerns in the United States, where a State Department spokesman said that Venezuela's desire to increase its arsenal poses a "serious challenge to stability in the Western Hemisphere." This year, however, State Department spokesman Philip Crowley said Venezuela's ambition to increase its arsenal, while suspicious, is an issue "between Venezuela and Russia."
"We don't care. ... Our primary concern is not if Venezuela wants to acquire ... this equipment," he said. "Our primary concern is that if Venezuela is going to increase its military hardware, we certainly don't want to see this hardware migrate into other parts of the hemisphere."
Chavez also met last year with Medvedev and Putin to negotiate and sign new oil and gas contracts between their countries. And in September 2009, Chavez announced while in Russia that Venezuela would recognize as independent republics the regions of Abkhazia and South Ossetia, becoming just the third country, after Russia and Nicaragua, to do so.
Russia generally has backed independence for the two regions. Nearby Georgia, which fought a war with Russia in 2008, opposes independence for the two regions.
By the CNN Wire Staff
Source: www.cnn.com
Wednesday, October 13, 2010
WASHINGTON, DISTRITO DE COLUMBIA -- (Marketwire) -- 05/13/10 -- Dr. Yannis Papantoniou, antiguo ministro de finanzas de Grecia y el Dr. Alexander Mirtchev, presidente de Krull Corp., analizaron el impacto del plan de garantía europeo en desarrollo para abordar los problemas de la deuda de Grecia en el futuro de la moneda europea única. La pregunta principal subrayando el debate fue el impacto del fondo de garantía, por un valor de más de 750 mil millones de euros (cerca de $1 billón – un millón de millones) que los países miembros de la Unión Europea y el Fondo Monetario Internacional (FMI) acordaron a raíz de la crisis de deuda de Grecia.
El Dr. Papantoniou considera que, a pesar de las dudas expresadas con respecto a la capacidad de Grecia de implementar las medidas de austeridad, mantener el euro es decisivo para la salud económica futura del país. Según el Dr. Papantoniou, "Sería un desastre económico si Grecia abandona el euro, y Grecia estaría formalmente en bancarrota. Si Grecia pudo recuperarse de un déficit de 12% en 1993, podemos utilizar las condiciones de estabilidad del euro y hacerlo una vez más, entonces la economía se recuperó en un 7%". Indicó que las acciones de la Unión Europea infundirán confianza, "y la confianza puede ayudar a la economía". Sin embargo, "lo que requerimos es un mecanismo institucional permanente en el lado fiscal y en el lado de fianza a fin de convencer a los mercados que Europa tiene la voluntad de sobrevivir".
El Dr. Mirtchev indicó que las garantías de la Unión Europea son importantes para el desarrollo del proyecto europeo total, que a cambio las hace globalmente relevantes, en particular para una seguridad financiera más amplia. "Incluso la manera en la que sean introducidas confirma las consideraciones económicas así como políticas". Las medidas firmes y decididas, y a pesar de opiniones contrarias, relativamente rápidas podrían calmar las aguas a mediano plazo para las economías más débiles en Europa y ofrecer una plataforma para la transformación adicional de la eurozona. Los desarrollos subsecuentes pueden ser "inestables, habrá un sube y baja". A pesar de las especulaciones, no parece que los países europeos readoptarían sus propias monedas, aunque las preguntas importantes para la eurozona continúan abordándose.
Los compromisos sin precedentes de los miembros de la Unión Europea, según el ministro Papantoniou, destacan las preguntas con relación a las nuevas dimensiones de la integración europea. "La unión monetaria no es una unión política, no se puede sostener una unión monetaria únicamente con un Banco Central, sin mecanismos para los estados más débiles". Sin embargo indicó que la institución de tales mecanismos "dará un gran paso hacia adelante en la integración europea. Habrá una gran lucha en los próximos meses y años hasta que punto la eurozona puede evolucionar en una unidad política y económica completamente desarrollada. Si lo hace sobrevivirá, de lo contrario enfrentará el peligro de disolución o rotura".
El Dr. Papantoniou considera que, a pesar de las dudas expresadas con respecto a la capacidad de Grecia de implementar las medidas de austeridad, mantener el euro es decisivo para la salud económica futura del país. Según el Dr. Papantoniou, "Sería un desastre económico si Grecia abandona el euro, y Grecia estaría formalmente en bancarrota. Si Grecia pudo recuperarse de un déficit de 12% en 1993, podemos utilizar las condiciones de estabilidad del euro y hacerlo una vez más, entonces la economía se recuperó en un 7%". Indicó que las acciones de la Unión Europea infundirán confianza, "y la confianza puede ayudar a la economía". Sin embargo, "lo que requerimos es un mecanismo institucional permanente en el lado fiscal y en el lado de fianza a fin de convencer a los mercados que Europa tiene la voluntad de sobrevivir".
El Dr. Mirtchev indicó que las garantías de la Unión Europea son importantes para el desarrollo del proyecto europeo total, que a cambio las hace globalmente relevantes, en particular para una seguridad financiera más amplia. "Incluso la manera en la que sean introducidas confirma las consideraciones económicas así como políticas". Las medidas firmes y decididas, y a pesar de opiniones contrarias, relativamente rápidas podrían calmar las aguas a mediano plazo para las economías más débiles en Europa y ofrecer una plataforma para la transformación adicional de la eurozona. Los desarrollos subsecuentes pueden ser "inestables, habrá un sube y baja". A pesar de las especulaciones, no parece que los países europeos readoptarían sus propias monedas, aunque las preguntas importantes para la eurozona continúan abordándose.
Los compromisos sin precedentes de los miembros de la Unión Europea, según el ministro Papantoniou, destacan las preguntas con relación a las nuevas dimensiones de la integración europea. "La unión monetaria no es una unión política, no se puede sostener una unión monetaria únicamente con un Banco Central, sin mecanismos para los estados más débiles". Sin embargo indicó que la institución de tales mecanismos "dará un gran paso hacia adelante en la integración europea. Habrá una gran lucha en los próximos meses y años hasta que punto la eurozona puede evolucionar en una unidad política y económica completamente desarrollada. Si lo hace sobrevivirá, de lo contrario enfrentará el peligro de disolución o rotura".
Monday, October 11, 2010
World Bank Says Reduced Spending in Latin America Can Help Tame Currencies
Latin American governments should reduce spending to temper currency gains and allow central bankers to pursue lower interest rates, the World Bank´s chief economist for the region said.
Augusto de la Torre, in an Oct. 9 interview from Washington, said the region cannot continue on a “consumption binge forever” that forces central banks to carry the burden of inflation control and ends up attracting dollar inflows.
“It would be very useful to rein in fiscal spending, creating space for investment through higher government savings,” said de la Torre, who was Ecuador’s central bank president from 1993 to 1997. Lower government spending would “generate the kind of savings that help relieve pressure on central banks and should help ease some appreciation of the currency.”
Five of seven Latin American currencies tracked by Bloomberg strengthened against the dollar this year, led by a 14.5 percent surge by Colombia’s peso. Political leaders in the region have few incentives to curb spending because upcoming elections in several countries and inflows of cheap cash make it more attractive to increase borrowing, de la Torre said.
In Brazil, the budget deficit widened to 3.4 percent of gross domestic product in the 12 month through August from a record low 1.23 percent in October 2008, according to central bank figures. In Peru, the fastest-growing major economy in South America, external short term debt jumped to $6 billion in June after reaching a two-year low of $4.2 billion in September 2009.
Budget Deficits
“There’s room to borrow and money is available now because it’s flowing to the region in good conditions,” said de la Torre, who has a doctorate in economics from the University of Notre Dame in South Bend, Indiana. “Rich countries have large fiscal deficits so people wonder: Why do we have to tighten if everybody is loosening.”
Policy makers in Brazil, Latin America’s biggest economy, increased this year the benchmark interest rate to 10.75 percent from a record low 8.75 percent to rein in consumer prices. Traders expect the bank will have to further raise the overnight rate next year to keep inflation in check, according to Bloomberg estimates based on interest rate futures.
Policy makers in Chile, who have raised the overnight rate this year by two percentage points to 2.5 percent, are expected to increase borrowing costs by at least another 25 basis points when they meet Oct. 14, according to the median estimate in a Bloomberg survey 17 economists.
Latin American countries may grow an average 5.4 percent this year while a swing from risk aversion to risk appetite is boosting capital inflows to emerging markets, helping strengthen their currencies, the World Bank said in a report last week.
Advanced economies’ growth will slow to 2.2 percent next year, from 2.7 percent this year, while emerging markets are expected to grow 7.1 percent this year and 6.4 percent next year, the International Monetary Fund said Oct. 6.
“Whether you’re on the left or the right, you don’t want to create overvalued currencies,” de la Torre said.
Source: bloomberg.net
Tuesday, October 5, 2010
Gold miners rush to Latin America as prices soar
By Mica Rosenberg and Diana Delgado
MEXICO CITY/BOGOTA
(Reuters) - Mining companies are ramping up gold exploration in Latin America as areas before seen as risky, like southern Mexico and Colombia, are now glittering with new projects as precious metals prices soar.
Exploration budgets, the first thing mining companies slashed during the financial crisis, plummeted 42 percent from 2008 to 2009, the largest one-year decline in two decades, according to consultancy Metals Economics Group (MEG).
But the rebound has been quick in mining-friendly countries like Mexico, Chile, Peru and Argentina. The region won 26 percent of global exploration investment last year, the largest slice since 2001, MEG said in a report.
"Latin America is the No. 1 spot for junior companies to be exploring. They have a long mining history ... and geologically it's very prospective ground," said Brent Cook, a U.S.-based independent mining analyst.
Investors are still shying away from Venezuela, where President Hugo Chavez has gone on nationalization sprees, as well as parts of Central America where communities and environmental groups oppose mines.
That leaves other countries in the region to benefit from record high gold prices, which peaked above $1,300 per troy ounce this month, boosted by a tumbling dollar.
"The gold price changed considerably the perspective of investors in exploration in Mexico," Arturo Bonillas, president of Canada's Timmins Gold Corp (TMM.V), told Reuters.
Timmins' stock price plunged 83 percent from March 2008 to December 2008 at the height of the crisis, but shares have since bounced back. The company will produce around 100,000 troy ounces of gold a year in northern Mexico, he said.
Gold output in Mexico, already a major copper and silver producer, has grown three-fold since 2003 with the country now producing 2 million troy ounces (62.4 tonnes) a year. Mexico has 738 mining exploration projects in operation and more than 60 percent are digging for precious metals.
Much of that growth will be driven by Goldcorp's (G.TO) massive Penasquito project. Even tycoon Carlos Slim, the world's richest man, is cashing in on the excitement by expanding mining at his Grupo Carso (GCARSOA1.MX) conglomerate.
LESS RISKY
The money is flowing to places considered too risky in the past, including poor states in southern Mexico and to Colombia, which is recovering from decades of guerrilla war and drug violence.
"Chiapas and Oaxaca (in southern Mexico) have historically been underplayed by the exploration community," said mining expert Peter Megaw. Now some junior exploration companies have found "bonanza grade" gold in the south and others are taking notice, he added.
Investment continues, with exploration spending in Mexico expected to balloon to between $1.2 billion and $1.5 billion over the next three years, despite concerns about spiraling drug violence in Mexico. Some exploration companies have left dangerous areas where cartels operate.
In Colombia, gold deposits under-explored for years are attracting miners after security fears ebbed under ex-President Alvaro Uribe. Before 1937, when decades of conflict began, Colombia was South America's top gold producer.
"The business climate and security is improving every day," said Michael Johnson, the chief operating officer at Calvista Gold Corp, soon to be listed on the Toronto stock exchange.
Calvista has an advanced exploration project on 400 acres (160 hectares) in northeastern Colombia, a region were Canada's Greystar Resources (GSL.TO), Ventana Gold (VEN.TO) and Galway Resources Ltd (GWY.V) already have a strong presence.
Colombia's mining regulator, Ingeominas, has granted more than 1,600 gold exploration titles since 2004. Some 60 large and junior-sized gold companies are looking for gold and other precious metals in jungle-covered mountains, with juniors investing around $200 million per year.
"Colombia is an unexplored country due to the violence," national mining association director Arturo Quiros said.
Excluding exploration, the Colombian gold industry could attract as much as $4 billion in investment over the next 10 years as companies develop the mines, Quiros said.
Argentina and Peru, both stable for foreign investors, are also reaping the rewards of the gold boom. Argentina's mining chamber expects gold production to increase 21 percent this year from 2009, reaching more than 2 million troy ounces.
The region's losers will likely be Venezuela and Bolivia, known for government takeovers of private assets.
Venezuela has rich gold veins but the only big private miner operating in the country is Russian-Canadian company Rusoro (RML.V). According to official statistics, formal miners produce about 192,000 troy ounces of gold a year (6 tonnes) in Venezuela, while the informal sector may produce twice that. The country's reserves are likely more than 11.6 million troy ounces (360 tonnes), the central bank says.
"I don't think we would consider operating in Venezuela because of the pollical risk," said Tim Haldane, senior vice president at Canada's Agnico-Eagle (AEM.TO), which runs the large Pinos Altos mine in Mexico.
(Additional reporting by Eduardo Garcia in Buenos Aires, Patricia Velez in Lima and Daniel Wallis in Caracas; Editing by Steve Orlofsky)
Source: www.bx.businessweek.com
MEXICO CITY/BOGOTA
(Reuters) - Mining companies are ramping up gold exploration in Latin America as areas before seen as risky, like southern Mexico and Colombia, are now glittering with new projects as precious metals prices soar.
Exploration budgets, the first thing mining companies slashed during the financial crisis, plummeted 42 percent from 2008 to 2009, the largest one-year decline in two decades, according to consultancy Metals Economics Group (MEG).
But the rebound has been quick in mining-friendly countries like Mexico, Chile, Peru and Argentina. The region won 26 percent of global exploration investment last year, the largest slice since 2001, MEG said in a report.
"Latin America is the No. 1 spot for junior companies to be exploring. They have a long mining history ... and geologically it's very prospective ground," said Brent Cook, a U.S.-based independent mining analyst.
Investors are still shying away from Venezuela, where President Hugo Chavez has gone on nationalization sprees, as well as parts of Central America where communities and environmental groups oppose mines.
That leaves other countries in the region to benefit from record high gold prices, which peaked above $1,300 per troy ounce this month, boosted by a tumbling dollar.
"The gold price changed considerably the perspective of investors in exploration in Mexico," Arturo Bonillas, president of Canada's Timmins Gold Corp (TMM.V), told Reuters.
Timmins' stock price plunged 83 percent from March 2008 to December 2008 at the height of the crisis, but shares have since bounced back. The company will produce around 100,000 troy ounces of gold a year in northern Mexico, he said.
Gold output in Mexico, already a major copper and silver producer, has grown three-fold since 2003 with the country now producing 2 million troy ounces (62.4 tonnes) a year. Mexico has 738 mining exploration projects in operation and more than 60 percent are digging for precious metals.
Much of that growth will be driven by Goldcorp's (G.TO) massive Penasquito project. Even tycoon Carlos Slim, the world's richest man, is cashing in on the excitement by expanding mining at his Grupo Carso (GCARSOA1.MX) conglomerate.
LESS RISKY
The money is flowing to places considered too risky in the past, including poor states in southern Mexico and to Colombia, which is recovering from decades of guerrilla war and drug violence.
"Chiapas and Oaxaca (in southern Mexico) have historically been underplayed by the exploration community," said mining expert Peter Megaw. Now some junior exploration companies have found "bonanza grade" gold in the south and others are taking notice, he added.
Investment continues, with exploration spending in Mexico expected to balloon to between $1.2 billion and $1.5 billion over the next three years, despite concerns about spiraling drug violence in Mexico. Some exploration companies have left dangerous areas where cartels operate.
In Colombia, gold deposits under-explored for years are attracting miners after security fears ebbed under ex-President Alvaro Uribe. Before 1937, when decades of conflict began, Colombia was South America's top gold producer.
"The business climate and security is improving every day," said Michael Johnson, the chief operating officer at Calvista Gold Corp, soon to be listed on the Toronto stock exchange.
Calvista has an advanced exploration project on 400 acres (160 hectares) in northeastern Colombia, a region were Canada's Greystar Resources (GSL.TO), Ventana Gold (VEN.TO) and Galway Resources Ltd (GWY.V) already have a strong presence.
Colombia's mining regulator, Ingeominas, has granted more than 1,600 gold exploration titles since 2004. Some 60 large and junior-sized gold companies are looking for gold and other precious metals in jungle-covered mountains, with juniors investing around $200 million per year.
"Colombia is an unexplored country due to the violence," national mining association director Arturo Quiros said.
Excluding exploration, the Colombian gold industry could attract as much as $4 billion in investment over the next 10 years as companies develop the mines, Quiros said.
Argentina and Peru, both stable for foreign investors, are also reaping the rewards of the gold boom. Argentina's mining chamber expects gold production to increase 21 percent this year from 2009, reaching more than 2 million troy ounces.
The region's losers will likely be Venezuela and Bolivia, known for government takeovers of private assets.
Venezuela has rich gold veins but the only big private miner operating in the country is Russian-Canadian company Rusoro (RML.V). According to official statistics, formal miners produce about 192,000 troy ounces of gold a year (6 tonnes) in Venezuela, while the informal sector may produce twice that. The country's reserves are likely more than 11.6 million troy ounces (360 tonnes), the central bank says.
"I don't think we would consider operating in Venezuela because of the pollical risk," said Tim Haldane, senior vice president at Canada's Agnico-Eagle (AEM.TO), which runs the large Pinos Altos mine in Mexico.
(Additional reporting by Eduardo Garcia in Buenos Aires, Patricia Velez in Lima and Daniel Wallis in Caracas; Editing by Steve Orlofsky)
Source: www.bx.businessweek.com
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